Actually, you will need to file either a married filing separate dual-status return (in which you report ONLY your U.S.-sourced income) OR a joint return with your spouse, in which you report ALL of your 2007 income, but get to claim a double standard deduction of $10,700 plus your wife's and child's personal exemption.
In either return, you can claim the Foreign Tax Credit for taxes paid to Taiwan.
In the joint return, you will need to apply for an Individual Tax Identification Number (ITIN) for your wife and child.
How you file your federal return will dictate how you will file your California state return.
I suspect that filing jointly with your spouse is the BEST way for you to file, but I would model the return BOTH ways to be sure. I specialize in returns like yours.
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